Half Yearly Report

RNS Number : 5307N

Aberdeen Standard Eur Lgstc Inc PLC

25 September 2019

 

ABERDEEN STANDARD EUROPEAN LOGISTICS INCOME PLC (the "Company")

Legal Entity Identifier (LEI):  213800I9IYIKKNRT3G50

HALF YEARLY REPORT FOR THE PERIOD ENDED 30 JUNE 2019

The Directors of Aberdeen Standard European Logistics Income PLC today announce the half yearly results for the period from 1 January 2019 to 30 June 2019.

"Capturing long-term income from high quality logistics real estate"

The Company reports:

-     NAV total return increased by 2.2% to 108.6 euro cents (97.1p) as at 30 June 2019;

-     First and second quarterly distributions declared in period totaling 2.82 euro cents (2.54p);

-     The additional €51.8 million (£46.4 million) equity capital raised in July will enable the company to acquire two brand-new warehouses in the Netherlands and Poland.

Tony Roper, Chairman of the Company, commented:

"This solid performance was predominantly driven by the Company's well diversified, high quality and modern portfolio delivering a total property return of 1.78%."

Evert Castelein, portfolio manager, commented:

"The key drivers behind the demand for logistics space in Europe, such as e-commerce, remain strong.

We have been able to build a high quality, well-diversified property portfolio with eleven investments in five countries and twenty eight strong covenant tenants.  We have invested in the most liquid part of the logistics market with an average investment price close to €27.0 million and an average building size of 28,000 square metres. This is an active part of the logistics market giving us plenty of options in terms of potential businesses from a wide range of sectors to lease to."

INTERIM BOARD REPORT - CHAIRMAN'S STATEMENT

Overview

I am very pleased to be presenting the Company's second Half Yearly Report.

During the six months to 30 June 2019 the Company completed its initial investment programme seeking to invest our shareholders' money into a portfolio of attractive logistics warehouses in Europe. The Investment Manager, as reviewed by the Board, has sought to build a portfolio of properties with predominantly long indexed leases to support a durable and growing income stream for shareholders. Following the more recent purchase at 's Heerenberg, the Company now owns eleven warehouses, diversified by geography and tenant base, which are well located at established distribution hubs within close proximity to cities with excellent transport links.

Since the 31 December 2018 year end, properties that the Company had already agreed to purchase were secured in Erlensee (Germany), Leon (Spain), Meung-sur-Loire (France), and Oss and Zeewolde (the Netherlands).

In February 2019, the Company completed the acquisition of a freehold logistics warehouse near Krakow, Poland for a net amount of €24.5 million. This property is situated in an established logistics area and benefits from its proximity to Krakow, its international airport and easy motorway access to Germany and the Czech Republic.

Finally in mid-June, the Company signed an agreement to purchase its eleventh warehouse located in 's Heerenberg in the Netherlands for €24.0 million. Completed in July 2019, this warehouse provides an attractive income profile with a fully CPI indexed lease term of over 12 years.

Details on the Company's portfolio and most recent acquisitions are provided in the Investment Manager's Report below.

Placing, Open offer and Offer for Subscription

On 5 July 2019, the Company announced the intention to raise further funds through a placing, open offer and offer for subscription seeking to incrementally add to and further diversify the portfolio.

On 26 July 2019, the Board announced that the Company had raised gross proceeds of approximately £46.4 million (equivalent to approximately €51.8 million at the then prevailing exchange rate). Applications had been received for 47,000,000 new Ordinary shares of 1p (new Shares) which were subsequently issued at the issue price of 98.75p per Share. Application was made for the admission of the new Shares to the premium segment of the Official List and to trading on the London Stock Exchange's main market for listed securities on 31 July 2019.

Following the issue of these new Shares, the total number of Shares in issue and therefore the voting rights in the Company is now 234,500,001 Shares.

Financing

Over the course of the last six months the Investment Manager's treasury team has sourced fixed term debt from banks which is secured on certain assets or groups of assets within the portfolio. These are non-recourse loans ranging in maturities between six and ten years and with interest rates ranging between 0.94% and 1.62% per annum. The current average interest rate on the total available fixed term debt arrangements of €108.9 million (when fully drawn down) is 1.4%.

Results

The unaudited Net Asset Value ("NAV") per Share as at 30 June 2019 was €1.09 (GBp - 97.14p), reflecting a NAV total return of 2.18% over the last six months. This solid performance was predominantly driven by the Company's well diversified, high quality and modern portfolio delivering a total property return of 1.78%. The closing share price at 30 June 2019 was 99.80p per Share (31 December 2018 - 102.25p), reflecting a premium to NAV of 2.8%.

Dividend

On 12 June 2019, the Directors declared the first quarterly interim distribution of 1.41 euro cents (equivalent to 1.27p) per Share in respect of the year ending 31 December 2019. This was paid in sterling on 10 July 2019. Of this distribution of 1.27p per Share, 0.94p was declared as dividend income with 0.33p treated as qualifying interest income.

On 6 September 2019 the second quarterly interim distribution of 1.41 euro cents (equivalent to 1.27p) per Share was declared, payable in sterling on 7 October 2019 with a record date of 20 September 2019 (ex-dividend date of 19 September 2019). This distribution of 1.27p consists of 1.19p declared as dividend income and 0.08p as qualifying interest income. The Company intends to declare quarterly interim distributions to shareholders, declared in respect of the quarters ending on 31 March, 30 June, 30 September and 31 December in each year.

The intention is to target a distribution level of 5% for an investor at launch in Euro terms. The Company's stated policy at launch was to engage, where appropriate, in currency hedging to seek to mitigate the potential volatility of income returns from the portfolio in sterling terms and to provide greater certainty as to the level of sterling distributions; but 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, nor does it seek to undertake currency hedging in respect of the capital value of the portfolio.

Directorate Change

Our previous Chairman, Pascal Duval, did not stand for re-election at the Annual General Meeting which was held on 11 June 2019 having taken on an executive role which would limit the amount of time that he could devote to the Company.

The Board would like to place on record its thanks for Pascal's work on behalf of the Company and for helping to guide us through the Initial Public Offering to where we are today.

Electronic Communications for Registered Shareholders

The Board is proposing to move to more electronic based forms of communication with its registered shareholders.

Increased use of electronic communications should be a more cost effective, faster and more environmentally friendly way of providing information to shareholders. Registered shareholders will therefore find enclosed with this Half Yearly Report a letter containing our electronic communications proposals and an opportunity to supply an email address to the Registrars. Registered shareholders who wish to continue to receive hard copies of documents and communications by post are encouraged to send back their replies as soon as possible but in any event by 31 October 2019.

Shareholders who hold their shares through the Aberdeen Standard Investment Trust Share Plan, ISA and Children's Plan (Planholders) will continue to receive all documentation by post in hard copy form for the time being. The Plan Manager is currently assessing how to adopt more electronically-based communications within these savings plans and Planholders will be contacted directly with more detail in due course.

Outlook

The Board and the Investment Manager believe that a well-diversified portfolio of eleven assets spread across five European countries with long indexed leases has been built up in a market that will continue to offer attractive opportunities. The logistics market is sizeable and continues to grow as the sector benefits from the rapid take-up of logistics facilities, largely helped by the growth in e-commerce, and the long inflation-linked leases that quality tenants are prepared to sign up to in many parts of Europe. This strategy which is focused on investments on the Continent with attractive pricing, indexation of leases as standard and lower financing costs underpins our investment policy.

As supply chain management gains importance due to growing e-commerce and ongoing urbanisation, prime logistics space may become scarce. The market has started to reflect this with increased pricing and lower yields which underpins valuations. However, with vacancy rates at historic low levels, rising construction costs and strong demand for modern warehouses, it is anticipated that rental growth will become an important driver for future capital growth in supply constrained areas.

Asset selection, price and tenant quality are key considerations and our Investment Manager has continuously sought to add to and improve the portfolio with this in mind. As the Company seeks to deploy the recently raised funds these factors will be imperative in determining the shape of the portfolio. Once committed, and as markets allow, the Company will continue to build on these foundations and to seek to grow the Company to provide shareholders with a more liquid and diversified investment opportunity in this sector.

Our Investment Manager's asset management team across Europe seeks to add value where possible. This can take the form of extensions to buildings or the addition of solar roof panels to add incremental revenues. ESG is an important element of the Investment Manager's investment process and increasingly discussed by our tenants helping to ensure it is a strategic focus for us.

The European logistics sector continues to grow with the increasing demand from market participants for newer quality warehousing driven by their demand for increased space and the rise in ecommerce operations. The sustainable, inflation protection that we see from longer term leases that our tenants are prepared to enter into and their commitment through increased capital spending on internal fittings should give shareholders assurance of the income and growth strategy that the Company is pursuing. Our Investment Manager continues to see opportunities across a variety of European countries and the intention remains to grow the Company through regular equity raises as and when market conditions allow.

Details on the Company and its portfolio together with up to date information including the latest share price can be found at: eurologisticsincome.co.uk.

Tony Roper

Chairman

24 September 2019

INTERIM BOARD REPORT - INVESTMENT MANAGER'S REVIEW

Introduction

Logistics is one of the most sought after sectors for investors in commercial real estate, thanks to structural drivers such as the rise of e-commerce and an attractive return profile compared to other asset classes. Thanks to ASI's local office network in Europe, we have been able to build a high quality, well-diversified property portfolio with eleven investments in five countries and twenty eight strong covenant tenants. These numbers include the most recent property transaction in 's Heerenberg, which was completed in July 2019. Gearing has been put to work, with an expected loan to value ratio (LTV) at or around 35%, with very attractive financing rates further supporting future income. Further optimisation of the portfolio is underway with a strong focus on ESG, initially concentrating on the installation of solar panels. Further diversification will be realised following the equity raise in July and on the completion of the two proposed deals which are currently in advanced due diligence.

Logistics sector benefiting from strong fundamentals

The demand for logistics investment in Europe remains strong, with investment activity at high levels and with capital values recording strong growth in most markets. Some of this appreciation in value is driven by higher investment demand and lower required rates of return sought by investors, but we are also seeing increasing market rents as a driver in many markets. The capitalisation of higher rental levels is expected to become an additional source of value growth over the next few years, particularly in the urban logistics segment and in key logistics areas where land supply constraints are limiting new developments.

We believe that many of the key drivers behind the demand for logistics space in Europe remain strong and are likely to be long-term and structural in nature rather than simply linked to the economic cycle. Despite the more recent benign levels of economic output, the structural shifts in consumption patterns and overall demand drivers are likely to remain supportive, while construction levels remain relatively low.

While the overall outlook for logistics is positive, we believe there will be a growing differentiation between different types of logistics property. Our research suggests that both the location and the efficiency of the asset are becoming increasingly important, and that tenants are increasingly focused on the environmental impact of their logistics operations. These are important criteria to be considered when building a real estate portfolio that will benefit from this strong fundamental demand for logistics in Europe.

Well-diversified property portfolio with modern specifications

The first half of 2019 has resulted in the purchase of six properties (with an aggregate net purchase price of €140.8 million), including five newly-built warehouses, partly funded through four loan transactions (€92.9 million). Acquisitions completed in the first half of 2019 were: Erlensee (net purchase price of €32.3 million), Krakow (€23.9 million), Leon (€15.4 million), Meung sur Loire (€23.5 million) and the two forward fundings in Oss and Zeewolde (€15.7 million and €30.0 million). In July, a further property transaction was closed in 's Heerenberg, the Netherlands, for €24.0 million which was partly financed with a loan facility of €8.0 million provided by Berlin Hyp. The final tranche of a Dutch loan facility still needs to be drawn, most likely in October 2019, which will bring the total loan portfolio to a size of €108.9 million and resulting in a portfolio consisting of eleven income producing assets, with gearing at or close to the targeted ratio of 35%.

At the end of June, the total net market value of the property portfolio was €272.7 million (excluding the €24.0 million for 's Heerenberg) with investments diversified across five countries. The Netherlands, one of the most attractive logistics markets in Europe, will have the largest allocation in the portfolio with 44% of portfolio value (including 's Heerenberg), followed by France (23%), Germany (19%), Poland (8%) and Spain (6%). Quality of the portfolio is considered to be high with six buildings constructed in 2018/2019 all in established locations alongside main transport corridors. The modern specifications of the warehouses provide options for the management of the buildings, particularly if we see lease changes, enabling us to generate stable income streams in the long run. We believe that we have invested in the most liquid part of the logistics market with an average investment price close to €27.0 million and an average building size of 28,000 square metres. This is an active part of the logistics market giving us plenty of options in terms of potential leasing candidates or the ability to sell under the right conditions.

We consider ourselves to be long-term investors and seek to hold the warehouses in the portfolio for a long period of time in order to keep transaction costs low. The average lease length of the portfolio (including 's Heerenberg) is years including breaks and 10.2 years excluding breaks all with indexed leases with strong covenant tenants. This puts us in a good position regarding both income generation and capital growth.

Property portfolio

Country	Location	Built	WAULT incl breaks in yrs	WAULT excluding breaks in yrs	% of Fund
France	Avignon	2018	8.1	11.1	15.4
France	Meung sur Loire	2004	7.3	7.3	8.0
Germany	Erlensee	2018	4.6	8.0	11.3
Germany	Flörsheim	2015	4.6	8.3	7.2
Netherlands	Ede	1999/ 2005	8.3	8.3	9.0
Netherlands	Oss	2019	15.0	15.0	5.5
Netherlands	Waddinxveen	1983/ 1994/ 2002/ 2018	14.4	14.4	11.2
Netherlands	Zeewolde	2019	15.0	15.0	10.3
Poland	Krakow	2018	4.1	4.1	8.3
Spain	Leon	2019	9.7	9.7	5.7
Total 30 June 19 (1)			8.8	10.0	91.9
Netherlands (2)	's Heerenberg (closed in July 19)	2009/ 2011	12.5	12.5	8.1
Total (1+2)			9.1	10.2	100.0

Income boosted by low financing costs

Monetary easing has created very attractive financing conditions, especially on the Continent. All-in interest rate costs for the portfolio, once all loans are drawn, will be approximately 1.4% with an average duration of 7 years. The recent addition in 's Heerenberg, which closed in July, has seen the best rate achieved to date, at 0.94% per annum over a six year term. Interest fixing for the loan facility in Oss will take place at drawdown, most likely in October, and will be added to the existing portfolio financing for Ede and Waddinxveen. The debt strategy of the Company is to finance properties in the countries where financing costs are lowest such as the Netherlands, France and Germany and to diversify loan maturities as much as possible. The target LTV for portfolio structural gearing remains at or around 35% and this is the level the Manager expects to achieve with the conclusion of the loan facilities for 's Heerenberg and Oss.

An additional credit line of GBP 6 million is in place at the Company level, financed by Sociéte Generale, to fund working capital requirements. Together with a group of banks, the Investment Manager is currently investigating the implementation of a larger revolving credit facility in order to provide more flexibility to fund additional purchases or provide funding guarantees.

 

Loan portfolio 30 June 2019

Country	Property	Bank	Existing loan € million	End date Loan	Duration Years	Interest (incl margin)
Germany	Erlensee	DZ Hyp	17.8	February 2029	10.0	1.62%
Germany	Flörsheim	DZ Hyp	12.4	February 2026	7.0	1.54%
France	Avignon + Meung sur Loire	Berlin Hyp	33.0	February 2026	7.0	1.57%
Netherlands	Ede + Waddinxveen	Berlin Hyp	29.7	June 2025	6.0	1.22%
Total (1)			92.9		7.3	1.46%

Pending loan facilities

Country	Property	Bank	Existing loan € million	End date Loan	Duration Years	Interest (incl margin)
Germany	's Heerenberg1	Berlin Hyp	8.0	June 2025	6.0	0.94%
Netherlands	Oss2	Berlin Hyp	8.0	June 2025	6.0	N/A
Total (2)			16.0		6.0
Total (1+2)			108.9		7.1

1     The 's Heerenberg loan facility was drawn at 8 July 2019 but with a starting date on the 27 June.

2     Oss loans facility will be part of the loan facility with Ede and Waddinxveen. Interest fixing at drawdown date.

 

ESG a key driver for future performance

Aberdeen Standard Investments (ASI) views responsible property investment as a fundamental part of our business. Our ESG team is committed to providing full support for the Company to ensure ESG matters remain front and centre and the teams on the ground are well informed.

During H1 2019 the Investment Manager explored various options to build on ESG across the portfolio and has identified several well defined projects to execute during 2019 and beyond. A current focus is investigating the leasing of warehouse roofs to solar energy investors and/ or installing solar photovoltaic cells on properties in the portfolio. We currently have one such agreement in place at the asset in Avignon where the roof is leased to Larcos for €160,000 per annum on a 20 year term. We are in the final stages of negotiating lease agreements in Ede and 's Heerenberg, both on 17 year terms, and have applied for government subsidies in Oss and Zeewolde.

An experienced consultant is advising us with the implementation of solar panels on the assets outside of the Netherlands.

Our first GRESB results should be available shortly. GRESB is a Global Real Estate Sustainability Benchmark assessment, which is used to measure the portfolio's ESG performance against a peer group of comparable funds resulting in a certain number of green stars with a maximum of 5. As a Group, ASI is very experienced with this benchmark and has collected 26 stars over 2018.

We believe that the portfolio is of high quality with six brand-new assets and LED lighting in all of our warehouses and this first assessment should help guide our thinking on wider initiatives.

Other green initiatives focus on increasing the number of Green leases with tenants in order to create a mutual interest between us and the tenant with the aim of reducing energy costs. The ability to collect and measure data for energy and water usage and waste disposal are key benefits of such a Green lease which is needed to help define further improvements. We have engaged with a consultant specialised in occupier surveys to create further alignment between the tenants' interests and those of the Company. Tenant satisfaction is key to keeping the occupancy of our warehouses at the maximum possible rate.

Capital growth reflected in higher valuations

In the first half of 2019, property values have increased by 2.8% to €272.7 million. This is based on 30 June 2019 valuations and purchase prices excluding acquisition costs for new investments made in the period. The capital growth is mainly driven by an inward yield movement.

Capital appreciation will also be triggered through annual indexation of rents and market rental growth supported by strong demand for logistics assets, a lack of supply and increasing construction costs for new developments.

Pipeline

The additional equity capital raised in July will enable us to acquire two brand-new warehouses in the Netherlands and Poland where we have strong ties through our dedicated ASI transaction managers. Both warehouses have a strong urban location, with the Polish one as a prime example of urban logistics, being very close to the city centre. The additional diversification these deals will bring will benefit the portfolio and further diversify the tenant base. More information will be released following due diligence once the assets are acquired.

Outlook

As an investment, the logistics sector remains a very compelling asset class thanks to strong market fundamentals especially in the most liquid part of the market that the Company has invested in. We believe growth in the sector is structural in nature, and not cyclical, with the rise of e-commerce as a key driver. Strong demand from investors and the lack of modern facilities for logistics companies should support property values and capital growth, not only through keener yields but also with the prospect of increasing rents.

We believe the current portfolio is in a very good position to deliver its target returns. Property quality is high, with six newly built warehouses in the portfolio, all with long indexed leases to financially strong counterparties. With our local asset managers we are strongly focussed on keeping our tenants satisfied and the buildings in good shape. Also, we seek to add additional value through active asset management with an ever stronger focus on ESG.

Aberdeen Standard Investments Ireland Limited

24 September 2019

INTERIM BOARD REPORT - DISCLOSURES

Principal Risks and Uncertainties

The principal risks and uncertainties affecting the Company are set out in detail on pages 10 and 11 of the Annual Report and Financial Statements for the period ended 31 December 2018 and have not changed. The risks include:

-      Investment Strategy and Objectives;

-      Investing in Real Estate;

-      Investment Portfolio and Investment Management;

-      Financial Obligations;

-      Valuation;

-      Financial and Regulatory;

-      Operational; and

-      Economic and Political Risk.

In addition to these risks, the outcome and potential impact of the UK Government's Brexit discussions with the European Union are still unclear at the time of writing, and this remains an economic risk for the Company in the meantime. In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the current financial year.

Going Concern

The Company's assets predominantly consist of high quality warehouses located across Europe together with cash. An analysis of the level of rental payments from tenants together with operational and other company costs indicates positive cash flow. In addition, the Company maintains an overdraft facility with Societe Generale which allows the Company to draw down additional funds if unexpected short term liquidity issues were to arise. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 

Directors' Responsibility Statement

The Directors are responsible for preparing this half-yearly financial report in accordance with applicable law and regulations. The Directors confirm that to the best of

their knowledge:

-      the condensed set of financial statements contained within the half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and gives a true and fair view of the assets, liabilities, financial position and net return of the Company as at 30 June 2019; and

-      the Interim Board Report (constituting the interim management report) includes a fair review of the information required by rule 4.2.7R of the UK Listing Authority Disclosure Guidance and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year) and 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period).

Tony Roper

Chairman

24 September 2019

PROPERTY PORTFOLIO

As at 30 June 2019

 

	Property	Tenure	Principal Tenant
1	Flörsheim, Germany	Freehold	Ernst Schmitz
2	Avignon, France	Freehold	Biocoop
3	Ede, The Netherlands	Freehold	Kruidvat
4	Oss, The Netherlands	Freehold	Orangeworks
5	Zeewolde, The Netherlands	Freehold	VSH Fittings
6	Waddinxveen, The Netherlands	Freehold	Combilo International
7	Erlensee, Germany	Freehold	Bergler
8	Leon, Spain	Freehold	Decathlon
9	Meung sur Loire, France	Freehold	Office Depot
10	Krakow, Poland	Freehold	Lynka

Properties Acquired Post 30 June 2019

Property		Tenure	Principal Tenant
11	's Heerenberg	Freehold	JCL

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period ended 30 June 2019

	Notes	Revenue €'000	Capital €'000	1 January to 30 June 2019 Total €'000	Revenue €'000	Capital €'000	25 October 2017 to 30 June 2018 Total €'000
REVENUE
Rental income		5,058	-	5,058	343	-	343
Property service charge income		936		936	-	-	-
Other operating income		6	-	6	74	-	74
		______	______	______	______	______	______
Total Revenue	2	6,000	-	6,000	417	-	417
		______	______	______	______	______	______
GAINS/LOSSES ON INVESTMENTS
Gains/(losses) on revaluation of investment properties	8	-	2,226	2,226	-	(909)	(909)
		______	______	______	______	______	______
Total Income and gains/losses on investments		6,000	2,226	8,226	417	(909)	(492)
		______	______	______	______	______	______
EXPENDITURE
Investment management fee		(755)	-	(755)	(79)	-	(79)
Direct property expenses		(1,127)	-	(1,127)	(79)	-	(79)
SPV property management fee		(56)	-	(56)	(5)	-	(5)
Other expenses		(1,049)		(1,049)	(474)	-	(474)
		______	______	______	______	______	______
Total expenditure		(2,987)	-	(2,987)	(637)	-	(637)
		______	______	______	______	______	______
Net operating return before finance costs		3,013	2,226	5,239	(220)	(909)	(1,129)
		______	______	______	______	______	______
FINANCE COSTS
Finance costs	3	(461)	-	(461)	(382)	-	(382)
		______	______	______	______	______	______
Net return before taxation		2,552	2,226	4,778	(602)	(909)	(1,511)
Taxation	4	-	(720)	(720)	-	-	-
		______	______	______	______	______	______
Net return for the period		2,552	1,506	4,058	(602)	(909)	(1,511)
		______	______	______	______	______	______
OTHER COMPREHENSIVE INCOME TO BE RECLASSIFIED TO PROFIT OR LOSS
Currency translation differences		70	203	273	-	407	407
Currency translation on conversion of distribution payments		-	-	-
		______	______	______	______	______	______
Other comprehensive income		70	203	273	-	407	407
		______	______	______	______	______	______
Total comprehensive return for the period		2,622	1,709	4,331	(602)	(502)	(1,104)
		______	______	______	______	______	______
Basic and diluted earnings per share	6	1.40c	0.91c	2.31c	(0.40c)	(0.61c)	(1.01c)
		______	______	______	______	______	______

The accompanying notes are an integral part of the Financial Statements.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)

	Notes	Revenue €'000	Capital €'000	25 October 2017 to 31 December 2018 Total €'000
REVENUE
Rental income		2,323	-	2,323
Property service charge income		-	-	-
Other operating income		211	-	211
		______	______	______
Total Revenue	2	2,534	-	2,534
		______	______	______
GAINS/LOSSES ON INVESTMENTS
Gains/(losses) on revaluation of investment properties	8	-	(4,080)	(4,080)
		______	______	______
Total Income and gains/losses on investments		2,534	(4,080)	(1,546)
		______	______	______
EXPENDITURE
Investment management fee		(587)	-	(587)
Direct property expenses		(225)	-	(225)
SPV property management fee		(26)	-	(26)
Other expenses		(1,005)	-	(1,005)
		______	______	______
Total expenditure		(1,843)	-	(1,843)
		______	______	______
Net operating return before finance costs		691	(4,080)	(3,389)
		______	______	______
FINANCE COSTS
Finance costs	3	(658)	-	(658)
		______	______	______
Net return before taxation		33	(4,080)	(4,047)
Taxation	4	-	-	-
		______	______	______
Net return for the period		33	(4,080)	(4,047)
		______	______	______
OTHER COMPREHENSIVE INCOME TO BE RECLASSIFIED TO PROFIT OR LOSS
Currency translation differences		-	407	407
Currency translation on conversion of distribution payments		7	(107)	(100)
		______	______	______
Other comprehensive income		7	300	307
		______	______	______
Total comprehensive return for the period		40	(3,780)	(3,740)
		______	______	______
Basic and diluted earnings per share	6	0.02c	(2.47c)	(2.45c)
		______	______	______

The accompanying notes are an integral part of the Financial Statements.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

Notes		30 June 2019 €'000	30 June 2018 €'000	31 December 2018 €'000
NON-CURRENT ASSETS Investment properties	8	272,314	20,400	148,918
		________	________	________
		272,314	20,400	148,918
		________	________	________
CURRENT ASSETS
Trade and other receivables	9	10,387	161	11,679
Cash and cash equivalents	10	23,702	188,147	50,133
		________	________	________
Total current assets		34,089	188,308	61,812
Total assets		306,403	208,708	210,730
		________	________	________
CURRENT LIABILITIES
Trade and other payables	11	9,110	463	8,657
Deffered tax liability	11	845	-	-
		________	________	________
Total current liabilities		9,955	463	8,657
		________	________	________
NON-CURRENT LIABILITIES Bank Loans	12	92,900	-	-
Net current assets		24,134	187,845	53,155
		________	________	________
Net assets		203,548	208,245	202,073
		________	________	________
SHARE CAPITAL AND RESERVES
Share capital	13	2,122	2,122	2,122
Special distributable reserve		200,835	207,227	203,691
Capital reserve		(2,071)	(502)	(3,780)
Revenue reserve		2,662	(602)	40
		________	________	________
Equity shareholders' funds		203,548	208,245	202,073
		________	________	________
Net asset value per share	7	€ 1.09	€ 1.11	€ 1.08
		________	________	________

The accompanying notes are an integral part of the Financial Statements.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period ended 30 June 2019

Notes		Share capital €'000	Special distributable reserve €'000	Capital reserve €'000	Share Premium €'000	Revenue reserve €'000	Total €'000
Balance at 1 January 2019		2,122	203,691	(3,780)	-	40	202,073
Total comprehensive return for the period		-	-	1,709	-	2,622	4,331
Interim Distributions paid	5	-	(2,856)	-	-	-	(2,856)
		_______	________	_______	_______	_______	______
Balance at 30 June 2019		2,122	200,835	(2,071)	-	2,662	203,548
		_______	________	_______	_______	_______	______
Balance at 25 October 2017		-	-	-	-	-	-
Original Share Issue		2,122	-	-	210,102	-	212,224
Share Issue costs		-	-	-	(2,875)	-	(2,875)
Share premium conversion		-	207,227	-	(207,227)	-	-
Net Losses for the period		-	-	(502)	-	(602)	(1,104)
		_______	________	_______	_______	_______	______
Balance at 30 June 2018		2,122	207,227	(502)	-	(602)	208,245
		_______	________	_______	_______	_______	______
Balance at 25 October 2017		-	-	-	-	-	-
Original Share Issue		2,122	-	-	210,102	-	212,224
Share Issue costs		-	-	-	(2,875)	-	(2,875)
Share premium conversion		-	207,227	-	(207,227)	-	-
Total Comprehensive return for the period		-	-	(3,780)	-	40	(3,740)
Interim Distributions paid			(3,536)	-	-	-	(3,536)
		_______	________	_______	_______	_______	______
Balance at 31 December 2018		2,122	203,691	(3,780)	-	40	202,073
		_______	________	_______	_______	_______	______

The accompanying notes are an integral part of the Financial Statements.

UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT

As at 30 June 2019

Notes		1 January to 30 June 2019 €'000	25 October 2017 to 30 June 2018 €'000	25 October 2017 to 31 December 2018 €'000
CASH FLOWS FROM OPERATING ACTIVITIES
Net gain/(loss) for the period before taxation		4,058	(1,511)	(4,047)
Adjustments for:
Gains/(losses) on investment properties	8	(2,226)	909	4,080
Decrease in operating trade and other receivables		1,292	(161)	(11,679)
(Decrease)/increase in operating trade and		(1,323)	463	2,727
other payables
Finance costs	3	461	382	658
		_______	________	_______
Cash generated by operations		(1,796)	1,593	(8,261)
		_______	________	_______
Net cash inflow from operating activities		2,262	82	(8,261)
		_______	________	_______
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment properties	8	(118,549)	(21,309)	(147,068)
Currency translation differences		273	407	307
		_______	________	_______
Net cash outflow from investing activities		(118,276)	(20,902)	(146,761)
		_______	________	_______
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid		(2,856)	-	(3,536)
Interest paid	3	(461)	(382)	(658)
Bank loans drawn		92,900	-	-
Proceeds from original share issue		-	212,224	212,224
Issue costs relating to original share issue		-	(2,875)	(2,875)
		_______	________	_______
Net cash outflow from financing activities		89,583	208,967	205,155
		_______	________	_______
Net increase in cash and cash equivalents		(26,431)	188,147	50,133
		_______	________	_______
Opening balance		50,133	-	-
		_______	________	_______
Closing cash and cash equivalents	10	23,702	188,147	50,133
		_______	________	_______
REPRESENTED BY
Cash at bank		23,702	9,142	6,279
Money market funds		-	179,005	43,854
		_______	________	_______
		23,702	188,147	50,133
		_______	________	_______

The accompanying notes are an integral part of the Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS

1.          Accounting Policies

The Unaudited Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standard ("IFRS") IAS 34 'Interim Financial Reporting' and are consistent with the accounting policies set out in the statutory accounts of the Group for the period ended 31 December 2018.

The condensed Unaudited Consolidated Financial Statements for the period ended 30 June 2019 do not include all of the information required for a complete set of IFRS financial statements and should be read in conjunction with the Consolidated Financial Statements of the Group for the period ended 31 December 2018, which were prepared under full IFRS requirements as adopted by the EU. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditor which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.          Revenue

	Half year ended 2019 €'000	Period ended 30 June 2018 €'000	Period ended 31 December 2018 €'000
Rental income Other income Property service charge income	5,058 6 936	343 74 -	2,323 211 -
	_______	________	_______
Total revenue	6,000	417	2,534
	_______	________	_______

3.          Finance costs

	Half year ended	Period ended	Period ended
	2019	30 June 2018	31 December 2018
	€'000	€'000	€'000
Liquidity fund interest paid	58	382	658
Interest on bank loans	403	-	-
	_______	________	_______
Total finance costs	461	382	658
	_______	________	_______

4.          Taxation

	Half year ended	Period ended	Period ended
	2019	30 June 2018	31 December 2018
	€'000	€'000	€'000
Taxation on profit on ordinary activities comprises: Deferred tax	720	-	-
	_______	________	_______
Total taxation	720	-	-
	_______	________	_______

5.          Distributions

	30 June 2019 €'000
2018 Third Interim dividend of 1.3p per Share paid 22 March 2019	2,856
	_______
Total Dividends Paid	2,856
	_______

A first quarterly interim distribution of 1.27p per Share was paid on 10 July 2019 to shareholders on the register on 21 June 2019. The distribution was split 0.94p dividend income and 0.33p qualifying interest income. Although the payment relates to the half year ended 30 June 2019, under International Financial Reporting Standards, the distribution is recognised when paid and it will be accounted for in the year ending 31 December 2019.

A second quarterly interim dividend of 1.27p per Share is payable on 7 October 2019 to shareholders on the register on 20 September 2019. The distribution was split 1.19p dividend income and 0.08p qualifying interest income.

6.          Earnings per share (basic and diluted)

	30 June 2019	30 June 2018	31 December 2018
Revenue net return/(loss) attributable to Ordinary shareholders	2,622	(602)	33
(€'000)
Weighted average number of shares in issue during the period	187,500,001	149,096,387	165,415,705
	_______	_______	_______
Total revenue return/(loss) per ordinary share	1.40c	(0.40)c	0.02c
	_______	_______	_______
Capital return/(loss) attributable to Ordinary shareholders (€'000)	1,709	(909)	(4,080)
Weighted average number of shares in issue during the period	187,500,001	149,096,387	165,415,705
	_______	_______	_______
Total capital return/(loss) per ordinary share	0.91c	(0.61)c	(2.47)c
	_______	_______	_______
Total return per ordinary share	2.31c	(1.01c)	(2.45c)
	_______	_______	_______

Earnings per Share is calculated on the revenue and capital loss for the period (before other comprehensive income) and is calculated using the weighted average number of Shares in the period of 187,500,001 Shares.

7.          Net asset value per share

	30 June 2019	30 June 2018	31 December 2018
Net assets attributable to shareholders (€'000)	203,548	208,245	202,073
Number of shares in issue	187,500,001	187,500,001	187,500,001
	_______	_______	_______
	108.6	111.1	107.8
	_______	_______	_______

The Company announced a NAV per Share of 107.1p in August 2019 as at 30 June 2019. This included the deduction of the first interim dividend of 1.41c per Share declared on 12 June 2019 with an XD date of 21 June 2019, in line with AIC SORP. As detailed in note 5, per International Financial Reporting Standards this distribution will be accounted for in the year ending 31 December 2019, and represents the difference between the two NAVs.

8.          Investment properties

	30 June 2019 €'000	30 June 2018 €'000	31 December 2018 €'000
Opening carrying value	148,918	-	-
Purchases at cost	121,170	21,309	152,998
Gains/losses on revaluation to fair value	2,226	(909)	(4,080)
	_______	_______	_______
Total Carrying value	272,314	20,400	148,918
	_______	_______	_______

The fair value of these investment properties amounted to €272,660,000. The difference between the fair value and the value per the condensed consolidated balance sheet consists of accrued income relating to the pre-payment for rent free periods recognised over the life of the leases totalling €346,000 which is separately recorded in the financial statements as a current asset.

9.          Trade and other receivables

	30 June 2019 €'000	30 June 2018 €'000	31 December 2018 €'000
Rents receivable	2,189	-	1,174
Accrued income	310	134	226
Cash held by Solicitors	-	-	975
Lease incentives	346	-	267
Other receivables	7,542	27	9,037
	_______	_______	_______
Total receivables	10,387	161	11,679
	_______	_______	_______

10.        Cash and cash equivalents

	30 June 2019 €'000	30 June 2018 €'000	31 December 2018 €'000
Cash at bank	23,702	9,142	6,279
Money market funds	-	179,005	43,854
	_______	_______	_______
Total cash and cash equivalents	23,702	188,147	50,133
	_______	_______	_______

11.        Current Liabilities

	30 June 2019 €'000	30 June 2018 €'000	31 December 2018 €'000
Rental income received in advance	1,513	-	710
Accrued acquisition and development costs	2,621	13	5,930
Company secretarial fees payable	-	77	-
Investment Management fee payable	1,311	79	563
All other fees payable	3,665	294	1,454
Deferred tax liability	845	-	-
	_______	_______	_______
Total payables	9,955	463	8,657
	_______	_______	_______

Other fees payable include tenant deposits of €1.7m, trade creditors of €1.3m and accrued expenditure of €0.7m.

12.        Bank Loans

	30 June 2019 €'000	30 June 2018 €'000	31 December 2018 €'000
External Bank Loans	92,900	-	-
	_______	_______	_______
	92,900	-	-
	_______	_______	_______

Property	Country	Loan	Start date	End date	Lender	Interest Rate
Erlensee	Germany	17,800	28/02/2019	28/02/2029	DZ Hyp	1.62%
Florsheim	Germany	12,400	28/02/2019	28/02/2026	DZ Hyp	1.54%
Avignon + Meung Sur Loire	France	33,000	12/02/2019	12/02/2026	Berlin Hyp	1.57%
Ede + Waddinxveen	Netherlands	29,700	06/06/2019	06/06/2025	Berlin Hyp	1.22%
		_______
		92,900
		_______

An €8m facility with Berlin Hyp secured on the Group's property in Oss, Netherlands was committed but undrawn as at 30 June 2019.

13.        Share capital

		Period ended	Period ended
	Half year ended 2019	30 June 2018	31 December 2018
	€'000	€'000	€'000
Opening balance	2,122	-
Managers shares issued in the period	-	56	56
Managers shares redeemed in the period	-	(56)	(56)
Ordinary shares issued on incorporation	-	1	1
Ordinary shares issued on admission	-	2,121	2121
	_______	_______	_______
Ending balance	2,122	2,122	2,122
	_______	_______	_______

Ordinary Shareholders participate in all general meetings of the Company on the basis of one vote for each Share held. Each Ordinary share has equal rights to dividends and equal rights to participate in a distribution arising from a winding up of the Company. The Ordinary Shares are not redeemable.

The total number of Shares authorised, issued and fully paid is 187,500,001. The nominal value of each Share is £0.01 and amount paid for each Share was £1.00. Share proceeds were received in tranches between 15 and 18 December 2017 and converted to Euro at a rate of £1:€1.131868907.

14.        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:

30 June 2019	Level 1 €'000	Level 2 €'000	Level 3 €'000	Total fair value €'000
Investment properties	-	-	272,314	272,314
30 June 2018
Investment properties	-	-	20,400	20,400
31 December 2018
Investment properties	-	-	148,918	148,918
	_______	_______	_______	_______

The lowest level of input is the underlying yields on each property which is an input not based on observable market data.

The lowest level of input is the three month LIBOR yield curve which is a directly observable input. The carrying amount of trade and other receivables and payables is equal to their fair value, due to the short term maturities of these instruments. Expected maturities are estimated to be the same as contractual maturities.

30 June 2019	Level 1 €'000	Level 2 €'000	Level 3 €'000	Total fair value €'000
Loan Facilities	-	95,528	-	-
	_______	_______	_______	_______

The lowest level of input is the interest rate applicable to each borrowing as at the balance sheet date which is a directly observable input.

15.        Related party transactions

The Company's Alternative Investment Fund Manager ('AIFM') throughout the period was Aberdeen Standard Fund Managers Limited ("ASFML"). 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 ASFML on not less than 12 months' written notice, following 2 years from the date of Admission of the Company to the London Stock Exchange.

Under the terms of the agreement portfolio management services are delegated by ASFML to Aberdeen Standard Investments Ireland Limited ('ASIIL'). The total management fees charged to the Consolidated Statement of Comprehensive Income during the period were €755,000, of which €755,000 was payable at the period end.

Under the terms of a Global Secretarial Agreement between ASFML and Aberdeen Asset Management PLC ('AAM PLC'), company secretarial services are provided to the Company by AAM PLC.

The Directors of the Company received fees for their services totalling €89,000.

16.        Post balance sheet events

Since the half year end, the Company has completed the acquisition of a freehold logistics warehouse in 's Heerenberg, the Netherlands, for a net purchase price of €24.0 million, providing an expected net initial yield of 5.0%. The acquisition was in part financed through a six year term loan from Berlin Hyp for a total value of €8.0 million, (see detail in Investment Manager's Report).

On 26 July 2019, the Company announced that it had raised gross proceeds of approximately £46.4 million (equivalent to approximately €51.8 million at the then prevailing exchange rate) through the issue of 47,000,000 new Ordinary shares pursuant to a placing, open offer and offer for subscription.

These proceeds will be used to help fund the pipeline of attractive investment opportunities identified by the Company's Investment Manager, in particular two logistics warehouses in Poland and the Netherlands.

The Company also put in place a new Share issuance programme in July, pursuant to which it has the ability to issue up to 200 million Ordinary shares and/or C shares in aggregate. The programme is flexible and may have a number of closing dates, providing the Company with the ability to issue Shares on appropriate occasions over a 12 month period in a timely and cost-effective fashion to fund further acquisitions from its strong pipeline of investment opportunities.

17.        Ultimate parent company

In the opinion of the Directors on the basis of shareholdings advised to them, the Company has no immediate or ultimate controlling party.

18.        Half Yearly Report

The financial information in this Report does not comprise statutory accounts within the meaning of Section 434 - 436 of the Companies Act 2006. The financial information for the period ended 31 December 2018 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the Company's auditor was unqualified and contained no statement under Section 498 (2), (3) or (4) of the Companies Act 2006. The financial information for the six months ended 30 June 2019 and the period ended 30 June 2018 has not been audited or reviewed by the Company's auditor.

19.        This Half Yearly Financial Report was approved by the Board on 24 September 2019.

The Half Yearly Report will be printed and issued to shareholders and further copies will be available at Bow Bells House, 1 Bread Street, London EC4M 9HH and on the Company's web site eurologisticsincome.co.uk*

* Neither the Company's website nor the content of any website accessible from hyperlinks on it (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

By order of the Board

ABERDEEN ASSET MANAGEMENT PLC, SECRETARY

24 September 2019

 

END

 

 

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