Drum Income Plus REIT

Half-year Report
RNS Number : 1090A
Drum Income Plus REIT PLC
28 May 2021
 

28 May 2021

 

THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.

Drum Income Plus REIT plc
("Drum" or the "Company")

 

HALF YEAR RESULTS 31 MARCH 2021

 

Drum Income Plus REIT plc (LSE: DRIP) announces its half-year results for the six months ended 31 March 2021.

 

The Company's half year results will shortly be available to view on the Company's corporate website at https://www.dripreit.co.uk and have also been submitted to the UK Listing Authority and will be shortly available for inspection from the National Storage Mechanism at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism  

 

LEI: 213800FG3PJGQ3KQH756

Enquiries:

Drum Real Estate Investment Management (Investment Manager)

 

Bryan Sherriff 

0131 285 0050

 

 

Dickson Minto W.S. (Sponsor)

 

Douglas Armstrong

020 7649 6823

Weber Shandwick (Financial PR)

 

Nick Oborne

020 7067 0721

 

 

JTC (UK) Limited (Company Secretary)

 

Susan Fadil

020 3893 1005

 

 

Important information:

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service this inside information is now considered to be in the public domain.

 

 

 

Chairman's Statement

INTRODUCTION

Drum Income Plus REIT was established in May 2015 to provide investors with a regular dividend income, together with the prospect of income and capital growth over the longer term, by investing in regional real estate assets. I am pleased to present this interim report for the six month period ended 31 March 2021.

The period under review has seen further economic and commercial uncertainty as the global pandemic known as COVID-19 continues to wreak a terrible havoc around the world. The vaccination programme in the UK is no doubt helping to turn the tide, but any optimism needs to be cautious at best, as, with regard to real estate in particular, it is not yet fully understood exactly what long term impacts the pandemic will have caused.

The Board's primary focus continues to be the health and wellbeing of its many stakeholders, including our portfolio of 84 tenants, with whom our investment adviser has worked extremely hard to work alongside, and provide financial support where appropriate, whilst cognisant of the overriding duty to act in the best interests of our shareholders.

The Group's Net Asset Value per share ('NAV') at 31 March 2021 was 68.97 pence per share, a fall of 5.5% since 30 September 2020. This fall is the result of a reduction in the market value of the investment portfolio.

Interim Dividends were suspended for the last 3 quarters of 2020 in order to preserve cash as a result of the economic and commercial damage caused by the pandemic. I am pleased to report that quarterly dividends have resumed in 2021 at the lower level of 0.75p per quarter, and the Board is confident that these dividend levels can be supported for the foreseeable future, subject of course to any additional business interruptions which might occur should new strains of the virus result in further lockdowns.

In the six months under review, the Group collected circa 90% of the rent and service charges due and payable, a very good outcome in the most uncertain of circumstances, although the overall rent receivable has fallen as a result both of the loss of a few tenants who have been unable to continue trading and also by agreeing rent concessions with those tenants who were willing to renegotiate terms with us. As a result of such concessions, in some cases we were able to remove break clauses and in others extend lease periods.

In March, the Board announced a strategic review to consider the future of the Company, including options to realise the value in the Group's property portfolio, primarily as a result of the continuing illiquidity in the Company's shares. The Board will announce the outcome of the review as soon as it is concluded.

Hugh Little Chairman
26 May 2021

 

INVESTMENT ADVISER'S REPORT

MARKET VIEW

The impact of Covid-19 and the lockdown on the UK Commercial property market is unprecedented and its effects will continue to shape the market even once we exit lockdown. Going forward, we expect COVID-19 uncertainty will continue to affect the market and corresponding values over the next six to nine months with a return to work and economic activity being a driver for values returning to long term figures. The banking industry is also likely to have a key role to play in market activity as they are a significant aspect of providing liquidity to Real Estate.

The Board and the Manager are taking every precaution to safeguard the health and wellbeing of staff, occupiers, and stakeholders. We are continually monitoring our assets in light of the outbreak of Covid-19 and our primary focus through this exceptionally challenging period has been to ensure that the portfolio is well positioned to begin its recovery once the COVID-19 "lockdown" restrictions are lifted, and our tenants can begin to generate income again.  We are focused on preserving the long-term value and financial strength of the Company.

However, Covid-19 has had and will continue to have a material impact upon the trading performance of the Company.

Our rental collection statistics of rents payable for the period March 20 to March 21 are solid and average 95% at the time of writing. We continue to work with our tenants and proactively manage the costs of occupying premises to ensure tenants are able to return to the premises safely and quickly.

The latest data confirms that investment transactions across the majority of sectors in the UK are showing a downward trajectory with the exception of Industrial assets where volumes reached the third highest quarterly total in the last 20 years (Savills). With the impact of Covid-19 rents are also under pressure as tenants try to secure Government assistance, however, unemployment is rising and this will undoubtedly have an impact on the affordability of rents in due course.

The Government via various subsidies have provided assistance to enterprise and as these subsidies come to an end the UK will undoubtedly face a renewed challenge.

Social distancing is a new phenomenon, however, it is one we all need to adapt to in order for the lockdown restrictions to be removed safely. Occupiers and Landlords will have to continue to work together to ensure buildings and occupied space are tenanted safely.

Aside from many potential occupiers now taking a 'wait-and-see' approach to acquiring space, the more physical aspect of not being able to undertake viewings has put the majority of  requirements on hold, however, with the recent relaxation of restrictions we are seeing viewings happening across the portfolio.

While some companies will use technology to enable employees to work from home post-Covid-19, it is our belief that the office is more important to people than ever for face-to-face meetings, collaboration, and knowledge sharing. An office with an attractive design and culture is also an important component for the attraction and retention of staff.

Homeworking will continue, but we are sociable creatures, so office life will, too. Many employees will look forward to getting back to the sense of community and the increased social interaction. The challenge lies in how to adapt workplaces. There is going to be substantially more awareness and interest on the part of employees, in terms of the quality of the spaces that they're occupying.

Ultimately, occupiers will demand more flexibility, some occupiers will require shorter leases and maybe we will see core space on a more traditional lease whilst occupiers add extra floor space on more flexible arrangements. Nothing is certain yet, and it is only as we start to come out of lockdown and employees start to return to the office, that we will really know to what extent things have changed.

Below are some highlights of the portfolio performance

·      Following the letting to SDS at Monteith House Glasgow for a period or 10 years, works have commenced for the extensive refurbishment of the premises.

·      Following the vacation of a tenant at 3 Lochside Way, Edinburgh we have undertaken a refurbishment of the suite which will now be marketed by JLL and Knight Frank.

·      A refurbishment of a suite has also been undertaken at Mayflower House, Gateshead where Knight Frank are about to market the suite.

·      Gosforth continues to produce a strong rental income for the Company but the value has been reduced due to the market sentiment and lack of transactional evidence for Shopping Centres, albeit almost 50% of the income at Gosforth is payable by Sainsbury's.

·      At Gosforth we have agreed two re-gears with Thompson Opticians and Card Factory along with a new letting to Webster & Carr  which shows the resilience of this retail centre.

DIFFERENTIATED INVESTMENT STRATEGY

In terms of investment focus the Company will continue to invest when funds are available in well located regional property where the basic fundamentals of supply and demand are favourable. The Company is stock selection driven, although the macro top-down analysis will always be a feature of the investment process.

The Investment Adviser believes that income will remain a large component of market return over the next few years.

INVESTMENT STRATEGY

The strategy continues to remain focussed on constructing and managing a quality diversified portfolio of real estate assets which offer the opportunity to increase rental value, income security and capital value via the Investment Adviser's expertise in entrepreneurial asset management and risk-controlled development.  The Investment Adviser targets commercial real estate assets with the following characteristics:

·      sector agnostic - opportunity driven;

·      lot sizes of between £2 million and £15 million, in regional locations;

·      offer the opportunity to add value via the Investment Adviser's proactive asset management;

·      situated in significant regional conurbations that have scope for physical improvement or improved asset management; and

·      which the Investment Adviser considers to be mispriced and/or properties which are subject to substandard lease lengths and voids.

RISK MANAGEMENT AND SUSTAINABILITY

The Investment Adviser considers and monitors risk through all aspects of the investment process. Risks identified prior to the acquisition of an asset are highlighted to the Board and considered by the Directors prior to approval of the purchase. These risks are then monitored by the Investment Adviser and reviewed at each quarterly Board meeting of the Company.

Sustainable investment is relevant in considering suitable investments for the Company and is a factor considered by the Investment Adviser when analysing risk. The Investment Adviser seeks to avoid depreciation in valuation caused by external environmental factors and also seeks to be aware of the need for buildings to deliver the future requirements of occupiers.

SECTOR WEIGHTINGS

The Company will not be benchmarked against IPD average sector weightings for other funds or REITs but will seek a balance within the portfolio to offer diversification without trending to the average.

Market subsector performance is an important element to returns but more importance is placed on the stock selection of the actual buildings purchased. Current subsector weightings are shown below illustrating the regional location bias of the portfolio.

GEOGRAPHIC CONCENTRATION by value at 31 March 2021

North East                               12,175,000 

Scotland                                  19,350,000

North West                              14,800,000

South West                               2,500,000

TOTAL                                   £48,825,000

 

SECTOR CONCENTRATION BY VALUE AT 31 March 2021

Offices                                    25,825,000 

Shopping Centres                 10,000,000

Retail                                        11,500,000

Industrial                                   1,500,000

TOTAL                                   £48,825,000

 

DEBT FINANCING

As previously reported, the Company has a £25 million, 3-year revolving credit facility with the Royal Bank of Scotland plc and have no need to refinance until 30 September 2022.

PERFORMANCE

For the six-month period commencing 1 October 2020, the Company's NAV has reduced from 79.3p to 68.97p, a decrease of 13%, resulting in a NAV total return of -5.5% for the period to 31 March 2021.

 

DIRECTORS' RESPONSIBILITIES

STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES

The risks, and the way in which they are managed, are described in more detail under the heading 'Principal risks' within the Strategic Report in the Group's Annual Report and Accounts for the year ended 30 September 2020. The Group's principal risks and uncertainties have changed materially since the date of that report as a direct result of the global health crisis and the attendant economic, social, financial and market crises and are expected to remain heightened for a considerable period, including the rest of the Group's financial year.  This is having a significant impact on capital values and income from the portfolio, as well as an impact on the regulatory environment in which the Company operates. The operational risks of the Company have also been exacerbated by the health crisis and resilience is being examined on an ongoing basis but has been sound to date both in the management of the portfolio and of the Company.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE INTERIM REPORT

We confirm that to the best of our knowledge:

•               the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the Financial Reporting Council and gives a true and fair view of the assets, liabilities, financial position and profit of the Group;

•               the Chairman's Statement and Investment Adviser's  Review  (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R, being  an  indication  of  important  events  that have occurred during the first six months of the  financial  year  and  their  impact  on  the condensed  set  of  consolidated  financial statements;

•               the Statement of Principal Risks and Uncertainties above is a fair review of the information required by DTR 4.2.7R; and

•               the Chairman's Statement and Investment Adviser's  Review  together  with  the  condensed set  of  consolidated  financial  statements  include a fair review of the information required by DTR 4.2.8R,  being  related  party  transactions  that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board

Hugh Little
Chairman

26 May 2021

 

 

 

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 31 March 2021

 

 

Six months ended

Six months ended

Year ended

 

 

31 March 2021

31 March 2020

30 September 2020

 

 

(unaudited)

(unaudited)

(audited)

 

 

Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total

 

Notes

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Capital gains/(losses) on investments

 

 

 

 

 

 

 

 

 

 

Held at fair value

 

 

(2,291)

(2,291)

-

(2,093)

(2,093)

-

(5,518)

(5,518)

Revenue

 

 

 

 

 

 

 

 

 

 

Rental income

 

1,948

-

1,948

-

-

2,088

4,145

-

4,145

Total Income/ expense                            

 

1,948

(2,291)

(343)

2,088

(2,093)

(5)

4,145

(5,518)

(1,373)

 

 

 

 

 

 

 

 

 

 

 

Expenditure

 

 

 

 

 

 

 

 

 

 

Investment

 

-

-

-

-

-

-

-

-

-

Adviser's fees                   

2

(99)

-

(99)

(114)

-

(114)

(205)

-

(205)

Property expenses                        

 

(303)

-

(303)

(360)

-

(360)

(391)

-

(391)

Other expenses                                   

 

(265)

-

(265)

(220)

-

(220)

(863)

-

(863)

Total expenditure                                

 

(667)

-

(667)

(694)

-

(694)

(1,459)

-

(1,459)

Profit / (loss) before finance

costs and taxation    

1,281

(2,291)

(1,010)

1,394

(2,093)

(699)

2,686

(5,518)

(2,832)

Net finance costs

Interest receivable

 

-

-

-

 

-

 

-

-

 

 

-

 

 

-

 

 

-

Interest payable                                  

 

(245)

-

(245)

(355)

-

(335)

(592)

-

(592)

Profit / (loss) before taxation   

1,036

(2,291)

(1,255)

1,059

(2,093)

(1,034)

2,094

(5,518)

(3,424)

Taxation

 

-

-

-

-

-

-

-

-

-

Profit / (loss) for the period

 

1,036

(2,291)

(1,255)

1,059

(2,093)

(1,034)

2,094

(5,518)

(3,424)

Total comprehensive profit / (loss) for the period

 

1,036

(2,291)

(1,255)

1,059

(2,093)

(1,034)

2,094

(5,518)

(3,424)

Basic and diluted earnings per

ordinary share                                     

 

2.71p

(6.00)p

(3.29)p

2.77p

(5.48)p

 

(2.71)p

5.48p

(14.44)p

(8.96)p

 

The total column of this statement represents the Group's Condensed Consolidated Statement of Comprehensive Income, prepared in accordance with IFRS. There are no other gains or losses for the period other than the total comprehensive profit reported above.

 

The supplementary revenue return and capital return columns are prepared under guidance published by the Association of Investment Companies.

 

No operations were acquired or discontinued during the period. All revenue and capital items in the above statement are derived from continuing operations. The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 

 

Condensed Consolidated Statement of Financial Position

As at 31 March 2021

 

 

As at 31 March

 

As at 31 March

 

As at

30 September

 

 

 

Notes

2021

(unaudited)

£'000

2020

(unaudited)

£'000

2020

(audited)

£'000

Non-current assets

Investment properties

5

 

47,365

 

52,870

 

49,569

 

 

47,365

52,870

49,569

Current assets

 

Trade and other receivables

 

2,796

2,282

3,003

Cash and cash equivalents

 

1,493

542

1,120

 

 

4,289

2,824

4,123

Total assets

 

51,654

55,695

53,692

Non-current liabilities

Bank loan

 

6

 

(22,659)

 

(22,592)

 

(22,626)

 

 

(22,659)

(22,592)

(22,626)

Current liabilities

 

Trade and other payables

 

(2,647)

(2,822)

(3,176)

 

 

 

 

 

Total liabilities

 

(25,306)

(25,414)

(25,802)

Net assets

 

26,348

30,280

27,890

 

Equity and reserves

Called up equity share capital

 

 

8

 

 

 

3,820

 

 

3,820

 

 

3,820

Share premium

 

5,335

5,335

5,335

Special distributable reserve

 

20,694

21,840

20,694

Capital reserve

 

(13,522)

(7,806)

(11,231)

Revenue reserve

 

10,021

7,091

9,272

Equity shareholders' funds

 

26,348

30,280

27,890

 

Net asset value per ordinary share

 

7

 

 

68.97p

 

79.26p

 

73.01p

The accompanying notes are an integral part of these condensed consolidated interim financial statements. Company  number: 9511797

The condensed consolidated interim financial statements on pages 12 to 21 were approved by the Board of Directors on 26 May 2021 and were signed on its behalf by:

 

Hugh Little Chairman

 

 

 

 

Condensed Consolidated Statement of Changes in  Equity

For the six months to 31 March 2021 (unaudited)

 

 

Share capital account

 

 

 

Share premium

 

 

Special distributable

reserve

 

 

 

Capital reserve

 

 

 

Revenue reserve

 

 

 

Total equity

 

£'000

£'000

£'000

£'000

£'000

£'000

As at 30 September 2020

3,820

5,335

20,694

(11,231)

9,272

27,890

Profit and total comprehensive profit for the period:

-

-

-

(2,291)

1,036

(1,255)

Transactions with owners recognised in equity:

 

 

 

 

 

 

Dividends paid

-

-

-

-

(287)

(287)

As at 31 March 2021

3,820

5,335

20,694

(13,522)

10,021

26,348

 

For the six months to 31 March 2020 (unaudited)

 

 

 

 

 

 

 

Share capital

 

Share

Special distributable

 

Capital

 

Revenue

 

Total

 

account

premium

reserve

reserve

reserve

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

As at 30 September 2019

3,820

5,335

21,840

(5,713)

7,178

32,460

Profit and total comprehensive profit for the period:

 

-

 

-

 

-

 

(2,093)

1,059

(1,034)

Transactions with owners recognised in equity:

 

 

 

 

 

 

Dividends paid

-

-

-

-

(1,146)

(1,146)

As at 31 March 2020

3,820

5,335

21,840

(7,806)

7,091

30,280

 

 

Condensed Consolidated Cash Flow Statement

For the six months ended 31 March 2021

 

Six months

ended 31 March

 

Six months

ended 31 March

 

Year ended

30 September

 

2021

2020

2020

 

(unaudited)

(unaudited)

(audited)

 

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

Profit/(Loss) before tax

(1,255)

(1,034)

(3,424)

Adjustments for:

 

 

 

Interest payable

245

291

592

Amortised loan costs

21

32

42

Unrealised revaluation (loss) / gain on property portfolio

2,291

2,053

5,518

Operating cash flows before working capital changes

1,302

1,342

2,728

Decrease/( Increase)  in trade and other receivables

207

361

(360)

 (Decrease)/ increase in trade and other payables

(526)

(192)

615

Net cash inflow from operating activities

983

1,511

2,983

 

Cash flows from investing activities

 

 

 

Rent free debtor movement

-

40

-

Property capitalised costs

(108)

(83)

(437)

Net cash outflow from investing activities

(108)

(43)

(437)

 

Cash flows from financing activities

 

 

 

Bank loan drawn down net of arrangement fees

 

-

-

Issue of ordinary share capital

 

-

-

Interest received

 

-

-

Interest paid

(215)

(291)

(790)

Equity dividends paid

(287)

(1,145)

(1,146)

Net cash (outflow) / inflow from financing activities

(502)

(1,436)

(1,936)

Net increase / (decrease) in cash and cash equivalents

373

32

610

Opening cash and cash equivalents

1,120

510

510

Closing cash and cash equivalents

1,493

542

1,120

1.   INTERIM RESULTS

The condensed consolidated financial  statements  have  been  prepared  in  accordance  with  International  Financial Reporting Standards ('IFRS') and IAS 34 'Interim Financial Reporting' as adopted by the European Union and the accounting policies set out in the statutory accounts of the Group for the year ended 30 September 2020. The    condensed consolidated financial statements do not include all of the information required for a complete set of IFRS financial statements and should be read in conjunction with the financial statements of the Group for the year ended 30 September 2020, which were prepared under IFRS as adopted by the European Union. There have been no     significant changes to management judgements and estimates.

The condensed consolidated financial statements have been prepared on the going concern basis. In assessing the going concern of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. After making enquiries, and bearing in mind the nature of the Group's business and assets, the Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable   future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

2.    INVESTMENT ADVISER'S FEE

 

 

Six months

Six months

Year

 

 

ended

ended

ended

 

 

31 March

31 March

30 September

 

 

2021

2020

2020

 

 

£'000

£'000

£'000

 

Investment  Adviser's fee

99

114

205

 

Total

99

114

205

 


The Investment Management fee is calculated as 0.7% per annum of the net assets of the Group. The Investment Management Agreement may be terminated by either party by giving not less than 12 months' notice.

3.    EARNINGS  PER SHARE

 

 

Six months ended

31 March 2021

Pence per

Six months ended

31 March 2020

Pence per

Year ended

30 September  2020

Pence per

 

£'000

Share

share

£'000

share

Revenue earnings

1,036

2.71

1,059

2.77

2,094

5.48

Capital earnings

(2,291)

(6.00)

(2,093)

(5.48)

(5,518)

(14.44)

Total earnings

(1,255)

(3.29)

(1,034)

(2.71)

(3,424)

(8.96)

Weighted average number of shares in issue

 

38,201,990

 

 

38,201,990

 

 

38,201,990

 

Earnings for the period to 31 March 2021 should not be taken as a guide to the results for the period to 30 September 2021.

4.    DIVIDENDS

A first interim dividend of 0.75p in respect of the quarter ended 31 December 2020 was paid on 26 February 2021 to shareholders on the register on 11 February 2021. A second interim dividend of 0.75p in respect of the quarter ended 31 March 2021 is due for payment at the end of May 2021 based on shareholders on the register on 6 May 2021.

5.    INVESTMENT PROPERTIES

 

As at

 

As at

 

As at

 

31 March

2021

31 March

2020

30 September

2020

 

£'000

£'000

£'000

Opening fair value

49,569

54,880

54,880

Purchases

-

-

-

Capitalised  costs

108

129

250

Amortisation of lease costs

(21)

(21)

(43)

Revaluation  movement

(2,291)

(2,118)

(5,518)

Closing fair value

47,365

52,870

49,569

 

Changes in the valuation of investment properties

 

 

As at

 

 

As at

 

 

As at

 

31 March

2021

31 March

2020

30 September

2020

 

£'000

£'000

£'000

Unrealised gain / (loss) on revaluation of investment properties

(2,291)

(2,093)

(5,518)


The properties were valued at £48,825,000 as at 31 March 2021 (31 March 2020: £53,300,000; 30 September 2020:£51,050,000) by Savills (UK) Limited ('Savills'), in their capacity as external valuers.

The valuation report was undertaken in accordance with the RICS Valuation - Professional Standards VPS4 (1.5) Fair   Value and VPGA1 Valuations for Inclusion in Financial Statements, which adopt the definition of Fair Value adopted by the  International  Accounting  Standards Board.

Fair value is based on an open market valuation (the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date), provided by Savills on a quarterly basis, using recognised valuation techniques as set out in the accounting policies and note 9 of the consolidated financial statements of the Group for the year ended 30 September 2020. There were no significant changes to the valuation process, assumptions or techniques used during the period.

6. BANK LOAN

 

 

 

As at

As at

As at

 

31 March

31 March

30 September

 

2021

£'000

2020

£'000

2020

£'000

Principal amount outstanding

22,760

22,760

22,760

Set  up costs

(101)

(168)

(201)

Total

22,659

22,592

22,559

         

 

On 30 September 2019 the Group entered into a £25 million secured 3 year revolving credit facility agreement with the Royal Bank of Scotland ("the Bank"). The interest rate on the facility is 1.75% plus LIBOR per annum.

As part of the loan agreement the Bank has a standard security over properties currently held by the Group, with an aggregate value of £48,825,000 at 31 March 2020. The fair value of investments  held as security adjusted for lease incentives of £1,460,011 was £47,364,989.

Under the financial covenants related to this loan, the Group has to ensure that for Drum Income Plus Limited:

·      the interest cover, being the rental income as a percentage of finance costs, is at least 250%;

·      the loan to value ratio, being the value of the loan as a percentage of the aggregate market value of the relevant properties, must not exceed 50%.

 

Breach of the financial covenants, subject to various cure rights, may lead to the loans falling due to repayment earlier than the final maturity date stated above. The Group has complied with all the loan covenants during the period.

7.  NET ASSET VALUE

The Group's net unit value per ordinary share of 68.97 pence (31 March 2020 79.26 pence; 30 September 2020 73.01 pence) is based on equity shareholders' funds of £26,348,000 (31 March 2020 £30,280,000; 30 September 2020 £27,890,000) and on 38,201,990 ordinary shares being the number of shares in issue at the period end.

8.  SHARE CAPITAL

 

 

 

 

Six months to 31 March

2021

 

Year to

30 September

2020

 

Six months to

31 March

2021

 

Year to

30 September  2020

 

 

Shares

Shares

£'000

£'000

 

Issued and fully paid

 

 

 

 

 

Opening total issued

 

 

 

 

 

ordinary shares of 10p  each

38,201,990

38,201,990

3,820

3,820

 

Issued  during  the period

-

-

-

-

 

Closing total issued

 

 

 

 

 

ordinary  shares

38,201,990

38,201,990

3,820

3,820

 

 

There is one class of  share.

 

 

 

 

 

 

                   

 

9.  INVESTMENT IN SUBSIDIARY

The Group's results consolidate those of Drum Income Plus Limited, a wholly owned subsidiary of Drum Income Plus REIT plc, incorporated in England & Wales (Company Number: 09515513).   Drum Income Plus Limited was incorporated on 28 March 2015, acquired on 19 August 2015 and began trading on 19 January 2016, when it transferred in the ownership of the entirety of the Group's property portfolio. Drum Income Plus Limited continues to hold all the investment properties owned by the Group and is also the party which holds the Group's borrowings.

 

10. RELATED  PARTY TRANSACTIONS AND FEES PAID TO  DRUM  REAL ESTATE  INVESTMENT MANAGERS

The Directors are considered to be related parties. No Director had an interest in any transactions which are, or were, unusual in their nature or significant to the nature of the Group.

The Directors of the Group received fees for their services. Total fees for the six months ended 31 March 2021 were £35,000 (six months ended 31 March 2020: £35,000; twelve months ended 30 September 2020: £75,000) of which £nil (31 March 2020: £nil; 30 September 2020: £nil) remained payable at the period end.

Under the terms of the agreements amongst the Group, R&H Fund Services (Jersey) Limited (the "AIFM") and Drum Real Estate Investment Management Limited (the "Investment Adviser"), the Group paid the AIFM a fixed fee of £15,000 per annum and the Investment Advisor a management fee of 0.7% per annum of the net assets of the Group.  The Group also paid the Investment Advisor a fixed fee of £40,000 for administration services.

The AIFM and the Investment Advisors are considered to be related parties.

The management agreements are terminable by any party on 12 months' written notice, provided that such notice shall expire no earlier than the fourth anniversary of Admission.

R&H Fund Services (Jersey) Limited received £4,000 in relation to the six months ended 31 March 2021 (six months ended 31 March 2020: £8,000; twelve months ended 30 September 2020: £15,000) of which £19,000 (31 March 2020: £32,000; 30 September 2020: £47,000) remained payable at the period end.

11. COMMITMENTS

The Group did not have any contractual commitments to refurbish, construct or develop any investment property, or for repair, maintenance or enhancements as at 31 March 2021 (31 March 2020: nil; 30 September 2020: nil).

12.  OPERATING SEGMENTS

The Board has considered the requirements of IFRS 8 'Operating Segments'. The Board is of the view that the Group is engaged in a single unified business, being property investment, and in one geographical area, the United Kingdom, and that therefore the Group has no segments. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the Group. The key measure of performance used by the Board to assess the Group's performance is the total return on the Group's net asset value. As the total return on the Group's net asset value is calculated based on the IFRS net asset value per share as shown at the foot of the Consolidated Statement of Financial Position, the key performance measure is that prepared under IFRS. Therefore, no reconciliation is required between the measure of profit or loss used by the Board and that contained in the financial statements.

13.  FAIR  VALUE MEASUREMENTS

The fair value measurements for assets and liabilities are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. These different levels have been defined as follows:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement  date.

Level 2 - inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly  or indirectly.

Level 3  - unobservable inputs for the asset or liability.

Value is the Directors' best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instrument. All investment properties are included in Level 3.

There were no transfers between levels of the fair value hierarchy during the year ended 31 March 2021.

14.  INTERIM REPORT STATEMENT

The Company's auditor has not audited or reviewed the Interim Report to 31 March 2021 pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information'. These are not full statutory accounts in terms of Section 434 of the Companies Act 2006 and are unaudited. Statutory accounts for the year ended 30 September 2020, which received an unqualified audit report and which did not contain a statement under Section 498 of the Companies Act 2006, have been lodged with the Registrar of Companies. No full statutory accounts in respect of any period after 30 September 2020 have been reported on by the Company's auditor or delivered to the Registrar of Companies.

 

 

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